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By Kristen Hawley, Skift Table

November 5, 2018

What changes a year — or, in this case, a month — can make.

A year ago, Skift Table took a detailed look at the 2017 reservations landscape. It was made up of essentially the same major players — a legacy brand — OpenTable — and its challengers, having graduated from upstart operations to viable business. But even in the short span of a year, the landscape has changed significantly thanks to shifts on a corporate level, acquisitions, and the popularity of new technology.

Late Friday, news broke that Resy had acquired competitor Reserve in a not-too-shocking consolidation move. After four years of working to differentiate themselves in the market, it seems both Reserve and Resy’s CEOs have conceded that their companies weren’t so different, after all.

“Reserve and Resy share the same passion for restaurants and operate on the exact same basic principle of offering cutting-edge technology at a fair price,” Reserve CEO Greg Hong told Skift Table. “We both view the restaurants on our platforms as partners, not just customers, and now we don’t have to get in each other’s way by competing for the same partners and instead can move faster together.”

Resy CEO Ben Leventhal said, “Reserve, like Resy, has spent the last four years working with amazing restaurants… [Greg] and I joke that we’ve been in the same trenches for the last four years.”

Leventhal said that a transition team will look at the two technologies side by side, implementing the best of each for all Resy restaurant partners, now totaling 4,000 domestically. Perhaps a bigger win for Resy is the market share it will gain in Reserve-heavy cities where it had less of a presence, like Chicago and Boston.

After hiring a chief operating officer a year ago and then inking a deal with Expedia and launching a new homepage in April, Reserve had largely gone quiet. At least one other company, Tock, said it walked away from a proposed merger.

The Incumbent

As the now-fortified Resy grows, gaining market share by more customers and locations, the 47,000-restaurant strong OpenTable is hoping to evolve into an international force to be reckoned with. Its strategy: become more like a travel brand.

In mid-October, OpenTable announced its CEO Christa Quarles would step down at the end of the year, handing the reins to current Kayak CEO Steve Hafner. In June, OpenTable parent company Booking Holdings had eliminated some high-level roles at OpenTable, and consolidated some others under the Kayak umbrella. Kayak, like OpenTable, is part of Booking Holdings.

Hafner called these moves “recognition that we’ve combined both OpenTable and Kayak functionally, by department.”

He also said he sees great opportunity in international expansion. “We want to be the restaurant operating system, and we want to do that on a global basis. And I think restaurants are probably the one category where specifically an American company has not exported that business model and that success internationally the way that Google and Facebook and Amazon and others have. I’m very bullish that OpenTable is going to do that for the restaurant space.”

OpenTable has launched in a number of international cities, from Amsterdam to Barcelona. Now that its teams from marketing to product to legal are functionally combined under Kayak, it seems to be making moves away from restaurant-centric thinking and toward becoming a worldwide travel brand.

A year ago, OpenTable’s message centered around becoming a “dining passport” for consumers, hoping to provide them with the most relevant recommendations no matter where they traveled. After changes at the top, that message may be even more indicative of where the company is heading.

So what’s better? Footprint, scale, or sentiment? Depends who you ask. Resy likes to tout that it has the country’s top restaurants on its platform (others will say this, too). But numbers don’t lie, so how far does “best” take you when your chief competitor has nearly 12 times the restaurants? While OpenTable’s may win the day on volume, Resy’s continued play to new and notable restaurants gives its network a certain cachet — at least in major metropolitan markets.

Show Me the Money

So… is anyone actually making money? As of July 2018, Resy confirmed it had raised $40 million in funding, Reserve, $27.3 million. Chicago-based Tock announced a $7.5 million series A round of funding just over two years ago, but otherwise doesn’t speak to its funding publicly, per a representative.

Priceline, since renamed Booking Holdings, took a $941 million write-down on OpenTable two years ago after acquiring the company for $2.6 billion in June 2014.

Outgoing CEO Quarles admitted OpenTable’s post-acquisition structure has its advantages. “I think one of the first benefits is OpenTable is no longer a standalone public company and so not necessarily pressured to that quarterly drum beat of ‘meet that number.’ Booking Holdings has a results orientation, but the reality is that you can invest in a longer time period,” she said onstage at this year’s Skift Restaurants Forum in September.

The pressure may no longer come from investors, but it does come from competitors, who are leaner and more nimble, often able to move faster. They also have the benefit of large amounts of venture capital investment, allowing them to perhaps charge restaurant partners less — or nothing at all — at the beginning of their relationship.

And, of course, private companies aren’t beholden to the same financial reporting and public scrutiny as a publicly-traded company. This could potentially lead to a similar situation that’s common among venture-backed startups: growth at all costs with little regard for margins and long-term viability. (That’s the “Can this business actually make money?’ question.)

Competitive State

To say that the younger, smaller companies are losing to industry giant OpenTable would be a mistake. If anything, these tech-savvy companies, which were able to build and capitalize immediately on OpenTable’s weaknesses, have helped reset the large company, which until the 2014 launch of its tablet-based Guest Center product installed hardware in restaurants.

Hafner also told Skift Table in mid-October that OpenTable would soon change its pricing strategy thanks to feedback from restaurants. Historically, OpenTable has charged restaurant customers a flat fee for the technology, and then $1 per seated diner if they came through an OpenTable marketing channel (like its app) or $.25 per diner if they booked directly with the restaurant (like via its own website.)

“We hear from restaurants that they want flexibility on that model and they want to control when they actually pay. So we’ve been doing a lot of tests and I’m very confident we’ll announce a change in our pricing model in the next quarter or so,” he said.

This model is consistently ripped apart by competitors, no one more vocal than Tock CEO Nick Kokonas, who last year accused OpenTable overcharging its restaurant customers. The company buried the information a restaurant needed in order to implement the proper code on its own website, he said, therefore charging clients $1 when it should have charged $.25.

Both Tock and Resy charge restaurants a flat monthly fee for its services, and each offer tiered pricing with several options.

There are other, smaller companies in the mix, too. Tech-savvy SevenRooms powers reservations and customer relationships management without much of a consumer-facing presence. And Yelp Reservations takes advantage of the hugely active Yelp community to promote its own reservations partner restaurants in its listings.

The way that people discover restaurants has evolved and continues to change. Instagram, and Google — its Maps program, especially — have emerged as important discovery tools, each with their third-party reservations integrations. These integrations are too new to definitively declare that they’ve changed the market, but the tide is moving in their favor.

The Reserve acquisition was a headline-grabbing win for Resy, which perhaps had the most to gain by swallowing its closest competition. “This marks a real change in the competitive landscape,” said Leventhal. “When you look at all of the major cities around the country, the best restaurants are using Resy. And that should be a very strong indication of how the competitive landscape is evolving and where we intent how we intend to build a business.”

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